The Appen Ltd (ASX: APX) share price was among the best performers on the S&P/ASX 200 Index (ASX: XJO) last month.
The artificial intelligence company’s shares stormed over 19% during the month. This stretched their year to date gain to a very impressive 39%.
Why did the Appen share price rocket higher last month?
Investors have been fighting to get hold of Appen’s shares since the middle of April when it released a trading update.
That update revealed that demand for its services remains strong despite the global pandemic.
Appen is a leading developer of high-quality, human annotated datasets for machine learning and artificial intelligence (AI). Through its team of over a million crowd-sourced experts, the company prepares the data that goes into the AI and machine learning models of some of the biggest tech companies in the world.
In light of this strong demand, the company remains on track to achieve its guidance in FY 2020.
It expects to achieve underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) in the range $125 million to $130 million. This represents a 23.8% to 28.7% increase on FY 2019’s underlying EBITDA of $101 million.
It also suggested that there is upside risk to its guidance due to a number of factors. These include a weaker Australian dollar, an increase in available crowd workers, and an increase in pandemic-led use of search, social media, and ecommerce platforms.
And while it has also warned that there are downside risks, I believe the real risk is to the upside. And judging by the Appen share price performance, the market does as well.
Is it too late to invest in Appen?
Although the Appen share price has been on fire this year, I don’t believe it is too late to buy its shares if you are investing with a long term view.
Due to the growing importance of AI and machine learning and its leadership position, I believe Appen can deliver strong growth over the next decade.
In light of this, I believe it is one of the buy and hold options on the market right now along with fellow tech share Altium Limited (ASX: ALU).
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More reading
- 3 five-star ASX 200 shares to buy in June
- ASX 200 down 1.2%: Westpac tumbles, Appen reaffirms guidance, Costa CEO to retire
- Appen share price falls after positive update fails to impress
- 10 quality ASX shares to buy in June
- Forget day trading: Get rich with these top ASX shares
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Altium and Appen Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The post The Appen share price smashed the market in May: Is it too late to buy? appeared first on Motley Fool Australia.
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